The Extent of the Probate Exception to Federal Subject-Matter Jurisdiction

Marshall v. Marshall

Anna Nicole Smith was married to J. Howard, who she claimed intended to transfer a not-so-small fortune to her upon his death. When Howard died the beneficiary of his will was his son, Pierce, who proceeded to charge Smith with defamation for her lawyer’s claims that he had engaged in forgery, fraud, and overreaching in order to gain control of his father’s assets. Smith’s responding documents asserted the truth of the allegations as a defense and charging Pierce with tortious interference. Smith won summary judgment on Pierce’s claims and won a trial on the merits for her claims, receiving an award of $449 million for compensatory damages, and $25 million in punitive damages. Pierce then argued that the Bankruptcy court lacked jurisdiction because of what is called the “probate/domestic-relations exception,” a common law rule that leaves probate matters to the States and allows federal jurisdiction only over “core matters,” which do not include final judgment. The question here is how far the “probate exception” reaches.

Because probate matters deal with property that is either held privately by citizens or publicly by the State itself, so the logic goes, the federal government has no place engaging in probate matters. As far as the Ninth Circuit was concerned, this exception from federal ‘subject-matter jurisdiction’ included all “questions which would ordinarily be decided by a probate court in determining the validity of the decedent’s estate planning instrument” and that to the extend that the State had partitioned authority over probate matters out of the hands of state courts of general jurisdiction it had done so with respect to all federal courts as well.

The Court traces the origins of the exception to Barber v. Barber where it announced the rule in dicta that federal courts lacked jurisdiction, even in cases where that jurisdiction is based on diversity of citizenship (See here), over cases for divorce and alimony; dicta which the Court later (in Ankenbrandt) traced to Congress’ original provision of federal diversity jurisdiction. This original law granted jurisdiction in “all suits of a civil nature at common law or equity,” a phrase that the Barber dissenters argued was tied to the English common law practice of denying English courts of chancery the right to issue divorce or alimony decrees. The Ankenbrandt Court stated that it did not rely on the historical accuracy of the Barber dissent, but rather Congress’ apparent acceptance of this construction prior to 1948, and the lack of any indication that it intended to overturn the construction with the replacement of the phrase with the term ‘all civil actions.’

In another case (Markham) the Court held that federal district courts did not have jurisdiction to administer an estate, but did have jurisdiction to adjudicate rights in that property that it could not itself administer “so long as [it did] not interfere with the probate proceedings.” This Court reads the phrase “interfere with the probate proceedings” to mean that the district court may not ‘disturb or affect the possession of property in the custody of a state court.’ In doing so, the Court points to the rule that ‘when one court is exercising in rem jurisdiction over a res, a second court will not assume in rem jurisdiction over the same res (where I’m pretty sure res is action and rem is property – comment if it’s something else).”

Finally, the Court argues that the bankruptcy court adjudicated a tort matter, not a probate matter, and that while the ‘Full Faith and Credit’ clause may make a State Court determination binding elsewhere, it does not interfere with the federal court’s right to adjudicate and determine the same issue as a matter of federal law, nor may a State destroy a person’s right to sue in federal court over any matter simply because the State has destroyed that party’s right to sue in State court.